Integralis does not expect to break even until 2013

Security integrator says ugly 2011 losses stemmed from efforts to embrace a more services-driven model

Integralis has attributed a €21.8m (£18.1m) annual loss to its efforts to reposition itself as a global service provider.

The security integration giant also saw revenue for the 12 months to 31 December fall by five per cent to €178m as weak market conditions - particularly in the US and the UK in the first half of the year - hit its top line. The UK recorded a 3.6 per cent revenue fall to €78.2m.

Net losses reached €21.8m for the period, compared with a profit of €1.4m a year earlier and the Prime Standard-listed firm admitted it does not expect to break even until 2013.

EBIT losses stood at €19.1m with EBITDA losses reaching €7.8m.

Its share price fell by 32 per cent during the year.

On plan

Talking to ChannelWeb, Integralis chief operating officer Simon Church (pictured, bottom) admitted the results "do not look fantastic on first viewing" but said the firm was performing to the plan underwritten by majority shareholder NTT.

"Overall, the loss is not attributable to a loss in the operational aspect of the business but is due to the investment in the business going forward," he said.

"The UK business is the strongest-performing business unit. It had a very strong second half and this year it has the strongest pipeline and professional services backlog in the company's history."

In its annual report, Integralis blamed the losses at an EBITDA level partly on the "muted performance" of its five individual regions and partly on various "deliberate management decisions" designed to reposition the firm as a global service provider.

Basis of a recovery

This includes investment in its global managed security services infrastructure and the establishment of several group functions in areas such as marketing, finance and professional services. The firm also increased the size of its consulting headcount from 166 to 187 last year, which it said exerted a temporary strain on earnings.

Integralis said it expected this investment in skills, particularly in the consulting segment, to "form the basis for a return to and sustained growth in profitability in the medium term".

Revenue for 2012 is set to rise back up to €190m, thanks partly to organic growth in the UK and Dach region, it explained.

But further losses at EBIT level are expected this year as Integralis continues to invest in its services business.

"However, they will be substantially lower than in 2011," the firm added. "With revenue continuing to rise, Integralis expects to break even in 2013."

US weakness

Despite improvements in the second half, the US was Integralis' bugbear last year. Revenue from the country fell 18.7 per cent to €32.1m as EBITDA losses hit €4.4m.

"Investments in building up greater consulting skills and gaining managed security services customers, which do not become lucrative until the long term, exerted heavy pressure on earnings in the first few quarters," Integralis said of its US operation.

The UK revenue decline was attributed to muted economic conditions in the first half and project delays, although the operation posted an EBITDA profit of €900,000 and enjoyed a strong second half.

The Dach region and France both grew marginally.

By solution segment, Integralis' product business saw by far the largest decline as revenue plunged 13.6 per cent to €76.6m. Support services grew 4.1 per cent to €67.9m; consulting, integration and training fell 3.4 per cent to €22.5m and managed security services were flat at €11.1m.